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Aon’s income increases in line with inflation, interest rate increases benefit the broker



Aon PLC reported $2.98 billion in revenue for the second quarter, up 3.4% year-over-year and up 8% on an organic basis.

Economic conditions such as increases in inflation and interest rates in recent months have added to earnings for the brokerage and have so far offset the effects of any slowdown in general economic activity on Aon’s business, the brokerage’s senior executives said on a call with analysts on Friday.

Aon’s core commercial insurance brokerage business reported $1.69 billion in revenue for the quarter, up 3% from last year’s second quarter and 7% higher on an organic basis, which excludes the impact of currency fluctuations, mergers and acquisitions and divestitures; its reinsurance brokerage business reported $537 million in revenue, up 7.4% and 9% on an organic basis.

The brokerage̵

7;s healthcare consulting business reported $414 million in revenue, up 5.9% and 11% on an organic basis. Its wealth solutions division, which includes retirement plan consulting services, reported $343 million in revenue, down 3.7% but up 3% organically.

Net profit rose 30.8% to $514 million. Income tax expense fell to $119 million from $203 million in the same period last year as Aon’s effective tax rate fell to 18.8% from 34.1%, according to the brokerage’s earnings report.

Economic trends, such as rising inflation and rising interest rates, have a positive effect on insurance brokers, which can offset a slowdown in general economic growth, says Christa Davies, Aon’s chief financial officer.

“Inflation increases policy values, which has a positive impact on our business, and we continue to see modest tailwinds in insurance pricing, which remains strong. Interest rate increases benefit us through capital gains and reduced pension liabilities,” she says.

Every 1% increase in interest rates increases Aon’s revenue and profit by $60 million, Davies said.


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